UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




FORM 10–Q/A


(Amendment No. 1)




(Mark One)






[ x ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For the quarterly period ended June 30, 2009




[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For the transition period from ___________ to _____________




Commission File Number: 000-53208




SINO GREEN LAND CORPORATION


(Exact Name of Registrant as Specified in Its Charter)




Nevada
54-0484915(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)




Suite 2711A, 27/F, Exchange Tower,


33 Wang Chiu Road, Kowloon Bay,


Kowloon, Hong Kong


People's Republic of China


(Address of principal executive offices, Zip Code)




+852-3104-0598


(Registrant's telephone number, including area code)




_____________________________________________________


(Former name, former address and former fiscal year, if changed since last report)




Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.




Yes [ x ]         No [ ]









Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).




Yes [ ]         No [ ]




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.




Large accelerated filer [ ]
Accelerated filer [ ]Non-accelerated filer [ ]
Smaller reporting company [ x ](Do not check if a smaller reporting company)




Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).




Yes [ ]         No [ x ]




The number of shares outstanding of each of the issuer's classes of common stock, as of  September 30, 2010  is as follows:




Class of Securities
Shares OutstandingCommon Stock, $0.001 par value
147,759,340




2




TABLE OF CONTENTS




PART IFINANCIAL INFORMATIONITEM 1.
FINANCIAL STATEMENTSConsolidated Balance Sheets as of June 30, 2009 (Unaudited and Restated) and December 31, 2008 (Restated)
5Consolidated Statements of Income and Other Comprehensive Income for the Three Months and Six Months Ended June 30, 2009 (Unaudited and Restated) and 2008 (Unaudited and Restated)
6Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 (Unaudited and Restated) and 2008 (Unaudited and Restated)
7Notes to Consolidated Financial Statements (Unaudited)
8-24ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
25ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
34ITEM 4.
CONTROLS AND PROCEDURES
34PART II

OTHER INFORMATIONITEM 6.
EXHIBITS.
37





3


EXPLANATORY NOTE





This quarterly report on Form 10-Q/A is being filed as Amendment to our quarterly report on Form 10-Q. We are amending this quarterly report to reflect restated financial statements following our determination that the financial statements previously filed with our annual report should not be relied upon for the reasons set forth in our report on Form 8-K, which was filed with the SEC on August 27, 2010.  As a result, we are also including a revised Item 4 “Controls and Procedures” to reflect the ineffectiveness of our internal controls, and a revised “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to reflect the restated financial information.   Currently dated Exhibits 31.1, 31.2 and 32.1 are included in this filing.




4





SINO GREEN LAND CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSAS OF JUNE 30, 2009 AND DECEMBER 31, 2008





JUNE 30,


DECEMBER 31,2009


2008(Unaudited & Restated)


(Restated)ASSETSCurrent AssetsCash and cash equivalents

$
627,605


$
544,860Accounts receivable, net


225,852



200,731Due from related parties


241,574



352,799Inventories


15,501



16,931Advances


485,344



497,568Other current assets


333,929



58,045Total Current Assets


1,929,805



1,173,366Property and Equipment, net


99,841



139,765Long-term Prepayments


18,891,915



16,258,707Total Assets

$
20,921,561


$
18,069,406LIABILITIES AND SHAREHOLDERS' EQUITYCurrent LiabilitiesAccounts payable and accrued expenses

$
2,087,064


$
1,529,786Advances from customers


48,739



56,443Due to related parties


384,501



129,444Due to shareholders


105,047



-Convertible debenture


360,710



360,710Derivative liability


314,795



340,266Total Current Liabilities


3,300,857



2,416,650Shareholders' EquityPreferred stock, $0.001 par value, 20,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2009 and December 31, 2008


-



-Common stock, $0.001 par value, 780,000,000shares authorized, 87,480,593 and 81,648,554

issued and outstanding as of June 30, 2009 andDecember 31, 2008, respectively


87,481



81,649Additional paid in capital


5,083,387



4,919,351Other comprehensive income


908,745



1,075,973


Retained earnings


11,541,091



9,575,783Total shareholders' equity


17,620,704



15,652,756Total Liabilities and Stockholders' Equity

$
20,921,561


$
18,069,406




The accompanying notes are integral part of these unaudited consolidated financial statements.




5





SINO GREEN LAND CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOMEFOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008(UNAUDITED)




THREE MONTHS ENDED


SIX MONTHS ENDEDJUNE 30,


JUNE 30,2009


2008


2009


2008(Restated)


(Restated)


(Restated)


(Restated)Sales

$
21,775,636


$
22,168,860


$
40,306,199


$
30,011,571Cost of goods sold


19,563,887



19,648,340



36,146,317



26,441,705Gross profit


2,211,749



2,520,520



4,159,882



3,569,866Operating expensesSelling expenses


663,933



305,668



888,137



526,474General and administrative expenses


372,528



644,797



1,309,480



735,117Total operating expenses


1,036,461



950,465



2,197,617



1,261,591Operating income


1,175,288



1,570,055



1,962,265



2,308,275Other income(expense)Interest expenses (income)


-



(17,027
)


(22,500
)


(16,650
)Change in derivative liability


64,271



(263,320
)


25,471



(263,320
)Others, net


261,827



(453
)


72



(453
)Total other income (expense)


326,098



(280,800
)


3,043



(280,423
)Net income


1,501,386



1,289,255



1,965,308



2,027,852Other comprehensive income (loss)Foreign currency

translation gain (loss)


(140,287
)


90,995



(167,228
)


122,505Comprehensive income

$
1,361,099


$
1,380,250


$
1,798,080


$
2,150,357


Net income per shareBasic

$
0.02


$
0.02


$
0.02


$
0.02Diluted

$
0.02


$
0.02


$
0.02


$
0.02Weighted average number of shares outstandingBasic


85,466,388



81,648,554



84,396,563



81,648,554Diluted


86,017,744



81,648,554



84,947,919



81,648,554




The accompanying notes are integral part of these unaudited consolidated financial statements.




6




SINO GREEN LAND CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008(UNAUDITED)




JUNE 30,2009


2008Cash flows from operating activities

(Restated)


(Restated)Net income

$
1,965,308


$
2,027,852Adjustments to reconcile net income to net cashprovided by operating activitiesDepreciation


42,088



40,484Amortization


423,991



137,975Debt issuance cost


-



106,899Change in derivative liability


(25,471
)


263,320Decrease / (Increase) in current assetsAccounts receivable


(25,338
)


(51,182
)Inventories


1,410



15,828Other current assets


(275,851
)


(95,741
)Advances


11,658



(30,475
)Long-term prepaid expense


(3,074,581
)


(3,046,707
)Increase (decrease) in current liabilitiesAccounts payable & accrued expense


(422,913
)


(100,096
)Advances from customer


(7,638
)


48,602Tax payables


1,031,302



(473
)Other payables


(29,234
)


346,549Net cash provided by (used in) operating activities


(385,267
)


(337,165
)Cash flows from investing activitiesAcquisition of plant, property, and equipment


(2,336
)


(3,771
)Net cash used in investing activities


(2,336
)


(3,771
)Cash flows from financing activities


Proceeds from (payment to) issuance of convertible notes net of offering cost


-



393,101Proceeds from short-term loan






399,362Proceeds from loan from related parties


471,016



(79,647
)Net cash provided by financing activities


471,016



712,816-Effect of exchange rate change on cash and cash equivalents


(668
)


22,329-Net increase in cash and cash equivalents


82,745



394,209Cash and cash equivalents, beginning balance


544,860



443,046Cash and cash equivalents, ending balance

$
627,605


$
837,255Supplement disclosure of cash flow informationInterest expense paid

$
-


$
53Income taxes paid

$
-


$
-




The accompanying notes are integral part of these unaudited consolidated financial statements.




7




SINO GREEN LAND CORPORATION AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS






1. ORGANIZATION AND DESCRIPTION OF BUSINESS




Organization




Sino Green Land Corporation (the “Company”) was incorporated in Nevada in March 2008 under the name of Henry County Plywood Corporation, as the successor by merger to a Virginia corporation organized in May 1948 under the same name. On March 23, 2009, the Company’s corporate name was changed to Sino Green Land Corporation.




The Company, through its Chinese operating subsidiaries and a variable interest entity, is engaged in the wholesale distribution, marketing and sales of premium fruits through wholesale centers and to supermarkets in China.




On January 15, 2009, the Company entered into a share exchange agreement with Organic Region Group Limited (“Organic Region”), its stockholders and its wholly owned subsidiaries, Zhuhai Organic Region Modern Agriculture Ltd. (“Zhuhai Organic”), and Guangzhou Organic Region Agriculture Ltd. (“Guangzhou Organic”), Fuji Sunrise International Enterprises Limited (“Fuji Sunrise”), Southern International Develop Limited (“Southern International”) and HK Organic Region Limited (“HK Organic”). Pursuant to the share exchange agreement and a related agreement with the Company’s two former principal stockholders:




·
The Company issued to the former stockholders of Organic Region a total of 81,648,554 shares of common stock, constituting approximately 98% of our outstanding stock, in exchange for all of the capital stock of Organic Region; and




·
Our former majority stockholders sold to the Company 1,666,298 shares of common stock, representing 50% of the outstanding shares, for $500,000 non-interest bearing convertible promissory notes. The Company cancelled these shares. As of April 27, 2009, the Company had paid the principal and accrued interest on the notes in full and had no further obligations to the former majority stockholders.




Prior to the closing of these transactions, the Company, then known as Henry County Plywood Corporation, was not engaged in any business activity.




The Company is the sole stockholder of Organic Region, a British Virgin Islands corporation which was incorporated on January 30, 2003.




8




Under generally accepted accounting principles, the acquisition by the Company of Organic Region is equivalent to the acquisition by Organic Region of the Company, then known as Henry County Plywood Corporation, with the issuance of stock by Organic Region for the net monetary assets of the Company. This transaction is reflected as a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the acquisition is identical to that resulting from a reverse acquisition. Under reverse acquisition accounting, the comparative historical financial statements of the Company, as the legal acquirer, are those of the accounting acquirer, Organic Region. The accompanying financial statements reflect the recapitalization of the stockholders’ equity as if the transactions occurred as of the beginning of the first period presented. Thus, only the 81,648,554 shares of common stock issued to the former Organic Region stockholders are deemed to be outstanding for all periods reported prior to the date of the reverse acquisition. As a result of the reverse acquisition effected by the share exchange agreement, the Company’s business has become the business of the Organic Region. The 1,666,297 shares of common stock that were outstanding on January 15, 2009, net of the 1,666,298 shares that were purchased by the Company and cancelled, are treated as if they were issued on January 15, 2009, as part of a recapitalization.




The Company has an exclusive agreement with Xiong Luo, who is one of the Company’s senior executive officers and the owner and holder of the business license for Guangzhou Greenland Co. Ltd. (“Guangzhou Greenland”). Pursuant to this agreement, Organic Region provides consulting services, including business operations, human resources and research and development services, to Mr. Luo with respect to Guangzhou Greenland to enable Guangzhou Greenland to operate the fruit trading business in China. In exchange for such services, Mr. Luo agreed to pay a consulting services fee to Organic Region equal to all of the revenues obtained by Guangzhou Greenland. The agreement gave the Company the ability to substantially influence Guangzhou Greenland’s daily operations and financial affairs, appoint its senior executives and approve all matters requiring stockholder approval. Mr. Luo also irrevocably granted the Company an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in Guangzhou Greenland and agreed to entrust all the rights to exercise voting power to the person appointed by the Company. Guangzhou Greenland is considered a variable interest entity under ASC 810 (Originally issued as FIN 46R), and its financial statements are included in our consolidated financial statements. Substantially all of the Company’s revenue is derived from the business of Guangzhou Greenland.




2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Unaudited Interim Financial Information




The accompanying unaudited financial statements (see note 13 for a description of the restatement) of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Company's audited financial statements and notes thereto for the fiscal year ended December 31, 2008, as restated. See Note 13. The results of the six month period ended June 30, 2009 are not necessarily indicative of the results to be expected for the full year ending December 31, 2009.




9




Principles of consoli dation




The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Zhuhai Organic and Guangzhou Organic, Fuji Sunrise, HK Organic, Southern International, and Guangzhou Metro Green Trading Ltd, together with its 100% Variable Interest Entity (VIE), Guangzhou Greenland. All significant inter-company accounts and transactions have been eliminated in consolidation.




In accordance with ASC 810, VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. All VIEs with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.




Use of estimates




The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.




Cash and cash equivalents




The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.




Accounts receivable




The Company’s policy is to maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. As of June 30, 2009 and December 31, 2008, the Company had accounts receivable, of $225,852 and $200,731, net of allowance for bad debts in the amount of $9,253 and $9,264, respectively.




Other current assets




Other current assets mainly includes $292,817 other receivable from an unrelated party, unsecured, due in January 2010 and free of interest.




10




Advances




As of June 30, 2009 and December 31, 2008, the advances amounted to $485,344 and $497,568, respectively.




Inventories




Inventories are valued at the lower of cost (determined on a weighted average basis) or market value. Management compares the cost of inventories with market value and an allowance is provided to reduce the value of inventories to their net market value. Inventories consisted of produce in the amount of $6,733 and $16,931 as of June 30, 2009 and December 31, 2008, respectively.




Property and equipment




Property and equipment are recorded at cost. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extend the life of plant, property, and equipment are capitalized. These capitalized costs may include structural improvements, equipment, and fixtures. All ordinary repair and maintenance costs are expensed as incurred.




Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets: 5 to 10 years for manufacturing machinery, 5 years for office equipment, and 5 years for motor vehicles.




Impairment




The Company applies the provisions ASC 360-10 (Originally issued as FAS No. 144). ASC 360-10 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.




The Company tests long-lived assets, including property, plant and equipment, for recoverability at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater than its fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments. The Company estimates fair value based on the information available in making whatever estimates, judgments and projections are considered necessary. There was no impairment of long-lived assets for the year ended December 31, 2008, or the period ended June 30, 2009.




11




Derivative liability




The derivative liability represents the value of warrants to purchase common stock that were issued in connection with certain debt and preferred stock offerings in 2008. The warrants are reported at fair value using the Black-Scholes model with changes in value reflected in earnings for the period.




Revenue recognition




The Company’s revenue recognition policies are in compliance with ASC 605 (Originally issued as Staff Accounting Bulletin (SAB) 104). Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. Discounts provided to customers by the Company at the time of sale are recognized as a reduction in sales as the products are sold. Sales taxes are not recorded as a component of sales.




Cost of Goods Sold




The “Cost of Goods Sold” line item of the Consolidated Statements of Income includes product costs and the amortization of the long-term leases on which the produce is grown and for which the full payment was made at the commencement of the lease. Discounts provided to the Company by vendors at the time of purchase are recognized as a reduction in inventory cost as the products are delivered.




All other costs, including warehousing costs, transportation costs, salaries, rent expense and depreciation expense, are shown separately in Selling Expense or General and Administrative Expense in the Consolidated Statements of Income.




Income taxes




The Company utilizes ASC 740 (Originally issued as SFAS No. 109, “Accounting for Income Taxes”), which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.




The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.




The Company records a valuation allowance for deferred tax assets, if any, based on its estimates of its future taxable income as well as its tax planning strategies when it is more likely than not that a portion or all of its deferred tax assets will not be realized. If the Company is able to utilize more of its deferred tax assets than the net amount previously recorded when unanticipated events occur, an adjustment to deferred tax assets would increase the Company net income when those events occur. The Company does not have any significant deferred tax asset or liabilities in the PRC tax jurisdiction.




12




Earnings per share




Earnings per share is calculated in accordance with the ASC 260 (Originally issued as Statement of Financial Accounting standards No. 128, “Earnings per share”), which superseded Accounting Principles Board Opinion No.15 (APB 15). Basic earnings per share is based upon the weighted average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.




Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Potentially dilutive common shares consist of common stock issuable upon the conversion of the outstanding shares of Series A preferred stock (using the if-converted method) and common stock warrants (using the treasury stock method). The following table presents a reconciliation of basic and diluted earnings per share (in thousands, except per share amounts):




Six month period EndedJune 30,2009


2008Net Income available to common shareholders

$
1,965


$
2,028Weighted average shares of common stock outstanding


84,397



81,649Diluted effect of warrants, options, and preferred stock


551Weighted average shares of common stock – diluted


84,948



81,649Earnings per share – basic

$
0.02


$
0.02Earnings per share -- diluted

$
0.02


$
0.02




Three month period EndedJune 30,2009


2008Net Income available to common shareholders

$
1,501


$
1,289


Weighted average shares of common stock outstanding


85,466



81,649Diluted effect of warrants, options, and preferred stock


551



-Weighted average shares of common stock – diluted


86,018



81,649Earnings per share – basic

$
0.02


$
0.02Earnings per share -- diluted

$
0.02


$
0.02




The warrants that were issued by Organic Region in April 2008 were assumed by the Company in connection with the reverse acquisition, and are reflected in the number of diluted shares 551,356 for the six month period ended June 30, 2009.




13




Foreign currency translation




The Company uses the United States dollar for financial reporting purposes. The Company’s subsidiaries maintain their books and records in their functional currency - Chinese Yuan Renminbi (RMB), being the primary currency of the economic environment in which their operations are conducted. Such financial statements were translated into United States dollars in accordance with ASC 830 (Originally issued as Statement of Financial Accounts Standards (“SFAS”) No. 52, “Foreign Currency Translation”). According to the Statement, all assets and liabilities are translated at the current exchange rate, stockholder’s equity are translated at the historical rates and income statement and statement of cash flows items are translated at the average exchange rate for the period. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC 220 (Originally issued as SFAS No. 130, “Reporting Comprehensive Income”) as a component of shareholders’ equity.




Fair values of financial instruments




ASC 825 (Originally issued as Statement of Financial Accounting Standard No. 107, “Disclosures about Fair Value of Financial Instruments”) requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for assets and liabilities qualifying as financial instruments are a reasonable estimate of fair value.




The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, other receivables, advances to suppliers, accounts payable and other payables.




As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheet. This is attributed to the short maturities of the instruments and that interest rates on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profile at respective balance sheet dates.




Segment reporting




ASC 280 (Originally issued as Statement of Financial Accounting Standards No. 131, “SFAS 131”), “Disclosure about Segments of an Enterprise and Related Information” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.




ASC 280 (Originally issued as SFAS No. 131) has no effect on the Company’s consolidated financial statements as the Company operates in one reportable business segment.




Statement of cash flows




In accordance with ASC 230 (Originally issued as SFAS No. 95), "Statement of Cash Flows," cash flows from the Company's operations is calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.




Recent Accounting Pronouncements




In June 2009, the FASB issued SFAS No. 166, "Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140" ("SFAS 166"), which requires additional information regarding transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. SFAS 166 eliminates the concept of a "qualifying special-purpose entity," changes the requirements for derecognizing financial assets, and requires additional disclosures. SFAS 166 is effective for fiscal years beginning after November 15, 2009.




14




In June 2009, the FASB issued SFAS No. 167, "Amendments to FASB Interpretation No. 46(R)" ("SFAS 167"), which modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. SFAS 167 clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity's purpose and design and a company's ability to direct the activities of the entity that most significantly impact the entity's economic performance. SFAS 167 requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity. SFAS 167 also requires additional disclosures about a company's involvement in variable interest entities and any significant changes in risk exposure due to that involvement. SFAS 167 is effective for fiscal years beginning after November 15, 2009.




In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles ("SFAS No. 168"), which becomes effective for financial statements issued for interim and annual periods ending after September 15, 2009. SFAS No. 168 replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 168 identifies the sources of accounting principles and the framework for selecting principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with US GAAP (the GAAP hierarchy).




Reclassifications




Certain prior year amounts have been reclassified to conform with the current year's presentation, none of which had an impact on total assets, stockholders' equity, net income, or net earnings per share.




3. PROPERTY AND EQUIPMENT, NET




Property and equipment consist of the following as of June 30, 2009 and December 31, 2008:




June 30,


December 31,2009


2008Manufacturing machinery

$
404,236


$
411,299Office equipment


40,331



38,037Motor vehicle


24,168



17,589Less: Accumulated Depreciation


(368,895
)


(327,160
)Property & Equipment, net

$
99,841


$
139,765




Depreciation expenses for the three month periods ended June 30, 2009 and 2008 were $21,078 and $23,427 respectively. Depreciation expenses for the six month periods ended June 30, 2009 and 2008 were $42,088 and $40,484 respectively.




4. DUE FROM/(TO) RELATED PARTIES




The Company has a balance due from one company who is under common control with the Company. The amounts were $241,574 and $352,799 as of June 30, 2009 and December 31, 2008, respectively. The amount due is interest free, unsecured and due on demand.




The Company has a balance due to two companies which are under common control with the Company. The amounts were $384,501 and $129,444 as of June 30, 2009 and December 31, 2008, respectively. The amount due is interest free, unsecured and due on demand.




15




The Company has a balance due to shareholders amounting to $105,047 and $0 as of June 30, 2009 and December 31, 2008, respectively. The amount due is interest free, unsecured and due on demand.




On January 15, 2009, the Company entered into a redemption agreement with Michael Friess and Sanford Schwartz, or the Majority Stockholders, whereby the Majority Stockholders surrendered an aggregate of 1,666,298 shares of common stock for redemption in exchange for the issuance of a convertible promissory note to each, or the Notes, in the aggregate principal amount of five hundred thousand dollars ($500,000) in favor of the Majority Stockholders. The principal and accrued interest of the Notes were payable on March 31, 2009. On March 31, 2009, the Company entered into a verbal agreement with the Majority Stockholders, pursuant to which the Company paid the Majority Stockholders $250,000, or one-half, of the principal amount due under the notes and agreed to pay them the remaining $250,000 on or before April 30, 2009, without penalty. Subsequently, the Company paid $250,000 on April 27, 2009.




5. LONG-TERM PREPAYMENTS




GZ Greenland Agriculture has entered into fourteen land leasing and developing agreements with various parties since 2005. The various parties are authorized to manage and plant the lands by GZ Greenland Agriculture who in return has the priority to purchase the agricultural products at fair market price. The life term of the rental agreements are twenty-five years with various due dates. GZ Greenland Agriculture is contracted to pay the fixed leasing fee of the entire contract period in lump sum at the inception of the agreements. GZ Greenland Agriculture uses straight-line method to amortize the Long-term prepayments, during the life time of the contracts. As of June 30, 2009 and December 31, 2008, the Company has long-term prepayments (net) in the amount of $18,891,915 and $16,258,707, respectively.




The details of long-term prepayments are listed below as of June 30, 2009 and December 31, 2008:




June 30,


December 31,2009


2008Long-term prepayment –Cost

$
20,432,264


$
17,450,561Accumulated amortization


(1,540,349
)


(1,191,854
)Net

$
18,891,915


$
16,258,707




Amortization expenses for the three month periods ended June 30, 2009 and 2008 were $174,858 and $35,573 respectively. Amortization expenses for the six month periods ended June 30, 2009 and 2008 were $349,716 and $154,161 respectively.




Amortization expenses for the next five years after June 30, 2009 are as follows:




2010

$
831,4692011


831,4692012


831,4692013


831,4692014


831,469After


14,734,569Total

$
18,891,915




16




6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES




Accounts payable and accrued expenses comprised the following as of June 30, 2009 and December 31, 2008:




June 30,


December 31,2009


2008Accounts payable

$
433,663


$
804,437Accrued payroll


64,498



90,916Accrued expenses


532,932



557,692Other payable


1,055,971



76,741$
2,087,064


$
1,529,786




7. SHORT TERM CONVERTIBLE NOTES




On April 23, 2008, Organic Region, which was then a privately-owned company, issued for $500,000 its one-year 18% convertible notes with common stock warrants in the total amount of $500,000.  Upon the completion of the reverse acquisition, the Company assumed the notes and related warrant obligations. The warrant holder are entitled to purchase up to $500,000 of securities at a per share price equal to 115% of the lowest cash price paid in a financing, which is defined as the consummation of one or more equity financings by the Company with aggregate proceeds of at least $3,000,000. The contingency regarding the warrants exercise was resolved and the warrants became exercisable on the completion of the financing. As of June 30, 2009, the Company had not raised $3,000,000 in financing, so the exercise price and the number of shares issuable upon exercise of the warrants had not been determined at June 30, 2009.




The Company accrued $22,500 interest expenses for the said convertible notes as of June 30, 2009, which was due on maturity date of the notes per agreements. The note was extended to August 2009 and the princip al of the note was paid off in August 2009.




As of June 30, 2009, $314,795 was recorded as the warrant liability and $360,710 was recorded as the convertible debt on the balance sheet.




8. EQUITY TRANSACTIONS




On January 15, 2009, the Company completed the reverse acquisition as described in Note 1. Pursuant to the share exchange agreement, the Company issued 81,648,554 shares of common stock in exchange for all of the outstanding common stock of Organic Region.




In May 2009, the Company issued an aggregate of 4,165,742 shares in connection with the termination of two agreements which Organic Region had entered into on January 28, 2008.Following the issuance of the shares, the Company had no further obligations under either of these agreements except for the Company’s obligation to pay an amount equal to 2% of the gross proceeds of any sales of securities, convertible debentures, or any other financings, private or public, other than financings by commercial banks, by the Company of up to an aggregate of $15 million occurring after January 1, 2009.




See Note 7 with respect to the issuance, in April 2008, of the Company’s 18% convertible notes in the total amount of $500,000 and warrants.




17




9. INCOME TAXES




The Company’s operations are conducted solely in the PRC. It does not conduct any operations in the United States or The British Virgin Islands and is not subject to income tax in either jurisdiction. For certain operations in PRC, the Company has incurred net accumulated operating losses for income tax purposes. The Company believes that it is more likely than not that these net accumulated operating losses generated in the PRC will not be utilized in the future. Therefore, the Company has provided full valuation allowance for the deferred tax assets arising from the losses at these locations as of June 30, 2009 and December 31, 2008. Accordingly, the Company has no net deferred tax assets.




Under the current PRC enterprise income tax law, which became effective January 1, 2008, there is a standard enterprise income tax rate of 25%. The tax holidays that were granted under the former tax law, will continue in effect until they expire. Guangzhou Greenland has a two year income tax exemption in 2008 and 2009 and will have a 50% tax reduction from 2010 to 2012.




The income tax rate of Xiong Luo, with respect to Guangzhou Greenland , which is part of consolidated financial statement as of June 30, 2009 and December 31, 2008 as a VIE under ASC 810-10 (Originally issued as FIN 46R), is 1.8% of the fixed income amount accounted by the local national tax bureau in which he conducts the businesses.




The provision for income taxes from continuing operations on income consists of the following for the six months ended June 30, 2009 and 2008:




The provision for income taxes from continuing operations on income consists of the following for the six months ended June 30, 2009 and 2008:




2009


2008PRC Current Income Expense

$
-


$
-Total Provision for Income Tax

$
-


$
-




The following is a reconciliation of the provision for income taxes at the tax rates of BVI and PRC to the income taxes reflected in the Statement of Operations for the six months ended June 30, 2009 and 2008.




2009


2008Tax rate in BVI


0
%


0
%Foreign income tax - PRC


25
%


33
%Exempt from income tax


(25
% )


(33
% )Foreign income tax – PRC(VIE)


1.8
%


1.8
%Exempt from income tax due to special tax policies


(1.8
% )


(1.8
% )Tax expense at actual rate


0
%


0
%




10. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS




Operations of the Company are all carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC's economy.




Operations of the Company in the PRC are subject to specific considerations and significant risks. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. Results of operations of the company may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.




18




There were no major customers who accounted for more than 10% of the total net revenue for the six month periods ended June 30, 2009 and for the year ended December 31, 2008.




Two vendors provided 56% and 29% of the goods to the Company during the six month periods ended June 30, 2009. Three vendors provided 91%, 3% and 6% of the goods to the Company during the year ended December 31, 2008. Accounts payable to these vendors amounted $0 and $804,438 on June 30, 2009 and December 31, 2008.




The Company extends credit to its customers based upon its assessment of their credit worthiness and generally does not require collateral. Credit losses have not been significant.




11. COMMITMENT




Operation Leases




The Company leases various office facilities under operating leases that terminate on various dates.




The Company incurred rent expenses $25,820 and $29,742 for the three months ended June 30, 2009 and 2008. The Company incurred rent expenses $56,624 and $52,183 for the six months ended June 30, 2009 and 2008.




The rent expenses for the next five years after June 30, 2009 are as follows:





2009

$
112,2472010


114,6072011


116,6342012


119,2612013


119,261After


61,497$
643,507




12. SUBSEQUENT EVENTS




Effective August 3, 2009, the Company entered into a Common Stock and Warrant Purchase Agreement with several investors for the issuance and sale of 13,129,410 shares of the Company's common stock at a purchase price of $0.085 per share. Such investors shall receive warrants to purchase 10,145,454 shares of Common Stock, exercisable at $0.11 per share at any time and from time to time through August 3, 2011.




In addition, effective August 3, 2009, the Company entered into a Common Stock and Warrant Purchase Agreement with several investors for the issuance and sale of 4,333,334 shares of Common Stock at a purchase price of $0.12 per share and an investor option to acquire up to 6,500,000 additional shares of Common Stock at a purchase price of $0.12 per share. Such investors shall receive (i) warrants to purchase 3,466,666 shares of Common Stock, exercisable at $0.15 per share at any time and from time to time through August 3, 2011 and (ii) in the event that such investors exercise their option to acquire additional shares of Common Stock, additional warrants to purchase up to 5,200,000 shares of Common Stock, exercisable at $0.15 per share at any time and from time to time for two years from the date of issuance.




On August 7, 2009, the Company entered into a Series A Convertible Preferred Stock and Warrant Purchase Agreement, or the Agreement, with several accredited investors, or collectively, the Investors, for the issuance and sale of an aggregate of 1,000,000 shares of the Company's Series A Convertible Preferred Stock, par value $0.001 per share, or the Preferred Stock, at a purchase price of $1.00 per share. Each share of Preferred Stock is convertible into shares of the Company's common stock at a price per share of $0.088, subject to certain adjustments, including an adjustment based on the Company's net income per share for the fiscal year ended December 31, 2009. If at any time until August 7, 2011 the Company issues securities, other than certain permitted issuances, at a per share price which is less than the then current conversion price of the Preferred Stock, the Company will reduce the conversion price of the Preferred Stock to the per share price of such subsequent issuance.




19




The Investors have the option to acquire an additional 1,000,000 shares of Preferred Stock upon the same terms. Such option expires on February 10, 2010, unless extended by the Company.




The Investors shall receive Series A Warrants to purchase an aggregate of 10,000,000 shares of Common Stock, exercisable at $0.14 per share at any time and from time to time through August 7, 2014. The exercise price of the Series A Warrants is subject to certain adjustments, including an adjustment based on the Company's net income per share for the fiscal year ended December 31, 2009. If at any time until August 7, 2011 the Company issues securities, other than certain permitted issuances, at a per share price which is less than the then current exercise price of the Series A Warrants, the Company will reduce the exercise price of the Warrants to the per share price of such subsequent issuance. At the option of the Company, the Series A Warrants must be exercised by the Investors, provided that the shares of Common Stock issuable upon the exercise of the warrants are then registered under the Securities Act of 1933, as amended, or the Act, and the per share market value of the Common Stock for the thirty prior trading days is $0.28 or more.




In addition, the investors shall receive Series B Warrants to purchase an aggregate of 10,000,000 shares of Common Stock, exercisable at $0.25 per share at any time and from time to time through August 7, 2014. The exercise price of the Series B Warrants is subject to certain adjustments, including a price adjustment based on the Company's net income per share for the fiscal year ended December 31, 2009. If at any time from August 7, 2010 to August 7, 2011 the Company issues securities, other than certain permitted issuances, at a per share price which is less than the then current exercise price of the Series B Warrants, the Company will reduce the exercise price of the Warrants according to a weighted-average anti-dilution formula. At the option of the Company, the Series B Warrants must be exercised by the Investors, provided that the shares of Common Stock issuable upon the exercise of the warrants are then registered under the Act, and the per share market value of the Common Stock for the thirty prior trading days is $0.50 or more.




Each Investor has agreed not to convert any shares of Preferred Stock or exercise any Warrants to the extent that such Investor's beneficial ownership of Common Stock would exceed 9.99% of the outstanding Common Stock upon such conversion or exercise.




The Company paid an aggregate of $50,000 of broker fees in connection with this transaction. The Company also reimbursed the Investors for $45,000 of due diligence expenses.




13. RESTATEMENT OF FINANCIAL STATEMENTS




On August 23, 2010, the Company concluded, after a review of the pertinent facts, that the previously issued financial statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2009 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010, September 30, 2009, June 30, 2009 and March 31, 2009 should not be relied upon due to the following:




20




·
The Company improperly allocated, for financial statement purposes, the proceeds received in connection with the April 2008 debt financing transaction and the August and December 2009 and January 2010 preferred stock financing transactions (collectively, “the financings”). The restated financial statements include the effects of properly allocating the financing proceeds between (1) the debt or preferred stock, as applicable, (2) any derivative liabilities associated with warrants for the purchase of common stock, and (3) any beneficial conversion features (“BCF”), as a component of additional paid-in capital, which allow the debt and preferred shareholders to convert their investment into the Company’s common stock on favorable terms.




·
Due to the improper allocation of proceeds on the April 2008 debt financing which resulted in an incorrect basis for the debt, the Company improperly reported the loss on debt extinguishment upon its settlement in August 2009. The debt settlement is appropriately reported in the restated annual financial statements for 2009. The settlement occurred in August 2009, and therefore does not affect the June 30, 2009 income statement presented herein. However, the accompanying balance sheets appropriately reflect the impact of the proper allocation of proceeds to the debt as of June 30, 2009, and its ultimate settlement is appropriately reflected in the December 31, 2009 financial statements, as restated.




·
Certain warrants containing variable exercise terms associated with the financings were reported as a component of paid-in capital instead of properly reflecting them as a derivative liability at fair value, with changes in fair value reported in the income statement each period. The restated financial statements include the effects of reporting the derivative liabilities and their associated changes in value correctly.




·
A BCF was inappropriately recorded as a debt discount on the April 2008 financing in addition to being amortized over the subsequent 12 months with a charge to expense. Furthermore, separate BCFs associated with the December 2009 and January 2010 preferred stock financings were erroneously omitted due to a misallocation of proceeds for financial statement purposes. The restated financial statements include the effects of allocating financing proceeds to the applicable BCFs by recording a preferred stock discount with a credit to additional paid-in capital. The discounts were then charged immediately to retained earnings as deemed preferred stock dividends pursuant to the terms of the agreement which provide immediate conversion rights.




·
Earnings per share has been restated to include the effects of the restated financial statements




The Company’s management has determined that as a result of such accounting matters, its reported net income was overstated by $83,222 for the three months ended June 30, 2009 and $385,218 for the three months ended June 30, 2008, and understated by $25,471 for the six months ended June 30, 2009 and overstated by $385,218 for the six months ended June 30, 2008.




Set forth below is a comparative presentation of the balance sheet and income statement as of and for the three and six months ended June 30, 2009 and 2008 as restated and as initially reported in the Company’s Reports on Form 10-Q previously filed with the Securities and Exchange Commission. These financial statements include the restated balance sheet as of June 30, 2009 and December 31, 2008.




21




SINO GREEN LAND CORPORATION AND SUBSIDIARIES




For the three and six months ended June 30, 2009




Three months ended June 30, 2009


Six months ended June 30, 2009As Reported


As Restated


As Reported


As RestatedINCOME STATEMENT:Sales

$
21,775,636


$
21,775,636


$
40,306,199


$
40,306,199Cost of goods sold


19,389,024



19,563,887



35,796,603



36,146,317Gross profit


2,386,612



2,211,749



4,509,596



4,159,882Operating expense:Selling expenses


838,796



663,933



1,237,851



888,137General & administrative expenses


372,528



372,528



1,309,480



1,309,480Total operating expenses


1,211,324



1,036,461



2,547,331



2,197,617Operating income


1,175,288



1,175,288



1,962,265



1,962,265Other income/(expense):Other income (expense), net


284,320



261,827



72



72Interest expense










(22,500
)


(22,500
)Beneficial conversion feature expense


125,000



-







-Change in derivative liability






64,271







25,471Total other income/(expense)


409,320



326,098



(22,428
)


3,043Net income


1,584,608



1,501,386



1,939,837



1,965,308Other comprehensive loss:Foreign currency translation gain/(loss)


(140,287
)


(140,287
)


(167,228
)


(167,228
)Comprehensive income (loss)

$
1,444,322


$
1,361,099


$
1,772,609


$
1,798,080Net income (loss) per share:Basic

$
0.02


$
0.02


$
0.02


$
0.02Diluted

$
0.02


$
0.02


$
0.02


$
0.02Weighted average number of shares outstandingBasic


85,466,388



85,466,388



84,396,563



84,396,563Diluted


86,017,744



86,017,744



84,947,919



84,947,919





22




For the three and six months ended June 30, 2008




Three months ended June 30, 2008


Six months ended June 30, 2008As Reported


As Restated


As Reported


As RestatedINCOME STATEMENT:Sales

$
22,168,860


$
22,168,860


$
30,011,571


$
30,011,571Cost of goods sold


19,648,340



19,648,340



26,441,705



26,441,705Gross profit


2,520,520



2,520,520



3,569,866



3,569,866Operating expense:Selling expenses


305,668



305,668



526,474



526,474General & administrative expenses


537,898



644,797



628,218



735,117Total operating expenses


843,566



950,465



1,154,692



1,261,591Operating income


1,676,954



1,570,055



2,415,174



2,308,275Other income/(expense):Other income (expense), net


(453
)


(453
)


(453
)


(453
)Interest expense


(2,027
)


(17,027
)


(1,650
)


(16,650
)Change in derivative liability


-



(263,320
)


-



(263,320
)Total other income/(expense)


(2,480
)


(280,800
)


(2,103
)


(280,423
)Net income


1,674,473



1,289,255



2,413,070



2,027,852Other comprehensive loss:Foreign currency translation gain/(loss)


90,995



90,995



122,505



122,505Comprehensive income (loss)

$
1,765,469


$
1,380,250


$
2,535,576


$
2,150,357Net income (loss) per share:Basic

$
1.00


$
0.02


$
1.45


$
0.02Diluted

$
1.00


$
0.02


$
1.45


$
0.02Weighted average number of shares outstandingBasic


1,666,297



81,648,554



1,666,297



81,648,554Diluted


1,666,297



81,648,554



1,666,297



81,648,554




23




As of June 30, 2009 and December 31, 2008





As Reported


As Restated


As Reported


As Restated6/30 /2009


6/30 /2009


12/31/2008


12/31/2008BALANCE SHEET:Convertible debenture

$
483,494


$
360,710


$
313,627


$
360,710Derivative liability






314,795







340,266Additional Paid-in Capital


5,413,520



5,083,387



5,419,351



4,919,351Retained earnings


11,402,970



11,541,091



9,463,133



9,575,783




24




ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS




The following discussion of the results of our operations and financial condition should be read in conjunction with our financial statements and the related notes, which appear elsewhere in this quarterly report. The following discussion includes forward-looking statements.





Statements in this quarterly report include “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this quarterly report, including the risks described under “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K/A for the year ended December 31, 2009, which includes restated financial statements for the years ended December 31, 2009 and 2008. In addition, such statements could be affected by risks and uncertainties related to the effects of our restatement of our financial statements, weather and natural disasters, our ability to conduct business in the PRC, product demand, including the demand for fruit and vegetable products, our ability to develop and maintain good relations with local cooperative suppliers, our ability to raise any financing which we may require for our operations, including financing for our green produce hub, competition, government regulations and requirements, pricing and development difficulties, our ability to make acquisitions and successfully integrate those acquisitions with our business, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this quarterly report.




Overview




We are engaged in the wholesale distribution, marketing and sales of premium fruits in China. Our main products include Fuji apples, emperor bananas and tangerine oranges. We purchase our products directly from farming cooperative groups to whom we provide varying degrees of farming, harvesting and marketing services. Almost all of our products are sold by us at the Guangdong Yun Cheng wholesale market and the Beijing Xin Fadi agricultural products wholesale market, two major markets for the sale of agricultural products in their respective areas, where we lease space to sell our produce. We sell to trading agents who sell our products to customers in and around the provinces in which the produce is grown.




Fruits, such as apples, bananas and oranges, as well as vegetables are considered staples in the Chinese diet, similar to rice and meat, and historically, demand for these products has not fluctuated with the ups and downs of the general economy. As a result, we have not yet seen a significant decline in our business from the recent economic downturn and the global credit crisis. However, if economic conditions further deteriorate, including business layoffs, downsizing, industry slowdowns and other similar factors that affect our distributors, customers, suppliers, farmers and creditors, we could see a reduction in the demand for our products which could have a material adverse effect on our business operations. Since we promote our products as premium foods, in troubled economic times, consumers may purchase cheaper fruits and vegetables rather than our products, which could affect both our revenue and our gross margin.




25




All fruits and vegetables are perishable, and are subject to spoilage if they are not delivered to market in a timely manner. Our ability to both purchase and sell produce is dependent upon a number of factors which are not under our control. Severe weather conditions and natural disasters, such as floods, droughts, frosts, earthquakes or pestilence, may affect our ability both to purchase products and to sell our products at the wholesale markets. Under these conditions, we may incur a higher cost of cold storage with no assurance that, even in the best conditions, spoilage cannot be avoided.




Since weather conditions are not uniform throughout China, our competitive position may be impaired if our competitors are able to deliver produce to market at a time when we are not able to make deliveries, either because we are unable to purchase the produce or because we are unable to bring the produce to market.




Agricultural products generally are subject to disease, blight and infestation by insects. Our revenue during 2009 was affected by a fruit insect disease which affected sales of our tangerine oranges. Any disease, blight or infestation that affects our produce could materially impair our ability to generate revenue from the affected fruit.




We only have long-term arrangements to purchase produce from five farming cooperatives. If we are not able to purchase our produce from these farmers, whether because of a shortage, because of government regulations or otherwise, we may be unable to purchase produce from other co-ops or farmers, and if we are able to purchase produce, our costs may be greater, which could impair our gross margins.




Substantially all of our produce is grown by farming cooperatives on land which we lease pursuant to 25-year lease and development agreements which we entered into during the period from 2005 to 2010. All of these leases were entered into with the farmers who held the land use rights from the government. The farming cooperatives consist of many farmers who held the land use rights. Pursuant to these agreements, as of June 30, 2009, we had paid a total of $20.4 million to the holders of the land use rights, who are not affiliated with us, and the farmers agreed to manage the land and plant the crops and we received a priority right to purchase the crops at fair market price. The farming cooperatives do not pay us rent for the land. We amortize our payments over the life of the leases. The amortization of our lease payments is included in cost of goods sold.




The current uncertainty arising out of domestic and global economic conditions, including the disruption in credit markets, may affect our ability to obtain either debt or equity financing which we may require in order to expand our business. Although our products are considered staples in Chinese consumers’ daily life, and, historically, demand for such staples has not fluctuated with the ups and downs of the general economy, if the current economic situation continues to deteriorate, we could see a more drastic reduction in the demand for our products. Since we are marketing our products as premium produce, consumers, in a time of economic difficulties, could purchase non-premium produce, which could have a material adverse effect on our business.




Seasonality




Our fresh fruit business is highly seasonal. Fuji apples are harvested mainly from late August until early November and are sold throughout the year. Tangerine oranges are harvested in late September through late November with the result that we have limited sales of tangerine oranges in the third quarter of the year. Emperor bananas are harvested throughout the year. They grow in an eight-month cycle, and are cultivated and harvested all year long. As harvested fruits cannot be stored at room temperature for a long time, they must be processed for sale as soon as they are harvested or stored at a cold temperature. As a result, the sales volume for our produce occurs during the harvesting season and for the months following the harvesting season.




We generally experience higher sales in the second half of the year. Sales in the second half of 2008 accounted for approximately 59% of our revenue for 2008. If sales in the second half of the year are lower than expected, our operating results would be adversely affected, and it would have a disproportionately large impact on our annual operating results.




26




Taxation




The PRC Enterprise Income Tax Law and Implementing Rules impose a unified EIT rate of 25.0% on all domestic-invested enterprises and foreign-invested enterprises, or FIEs, unless they qualify under certain limited exceptions. The law gives the FIEs established before March 16, 2007, such as our subsidiaries Zhuhai Organic and Guangzhou Organic, a five-year grandfather period during which they can continue to enjoy their existing preferential tax treatment. During this five-year grandfather period, the old FIEs which enjoyed tax rates lower than 25% under the original EIT law shall gradually increase their EIT rate by 2% per year until the tax rate reaches 25%. In addition, the FIEs that are eligible for a full exemption and 50% reduction under the original law are allowed to retain their preferential treatment until these holidays expire.




Under the current income tax laws and the related implementing rules, FIEs engaging in agriculture businesses, such as Guangzhou Organic, are entitled to a two-year tax exemption from PRC enterprise income tax, subject to approval from local taxation authorities. Guangzhou Organic is tax exempt for 2008 to 2009 and is entitled to a 50% tax reduction for the three years thereafter. Due to the absence of significant business in 2008, Zhuhai Organic was entitled to tax exemption in 2007, and will be entitled to a one-year tax exemption after the business resumes. However, Zhuhai Organic did not constitute a significant source of revenue or income in 2009 or 2008. Currently, pursuant to income tax law, the income tax rate for foreign-capitalized enterprises is 25% and the value-added tax rate is 13%.




Accounting Treatment of Financing Instruments




In April 2008, Organic Region, which was then a privately-owned company, issued, for $500,000, its one-year 18% convertible notes in the principal amount of $500,000 and warrants to purchase common stock after Organic Region effects a going public transaction, which includes a reverse acquisition with a publicly traded shell corporation. Due to variability in the terms of the warrants’ exercise price for which accounting rules preclude them from being considered as indexed to our common stock, the warrants are recorded at fair value, with changes in value reported in the income statement each period. Although the debt was paid off in 2009, the warrants remain outstanding.




Restatement of Financial Statements




On August 23, 2010, we concluded, after a review of the pertinent facts, that the previously issued financial statements contained in our annual report on Form 10-K for the year ended December 31, 2009 and our quarterly reports on Form 10-Q for the quarters ended March 31, 2010, September 30, 2009, June 30, 2009 and March 31, 2009 should not be relied upon for reasons set forth in Note 13 of Notes to Consolidated Financial Statements. This quarterly report reflects restated financial statements for the three and six months ended June 30, 2009 and 2008 because of our failure to account properly for the treatment of securities issued in financings during 2009 and 2008. As a result, our net income, as originally reported, was overstated by approximately $83,222 for the three months ended June 30, 2009 and $385,218 for the three months ended June 30, 2008, and understated by $25,471 for the six months ended June 30, 2009 and overstated by $385,218 for the six months ended June 30, 2008.




27




Results of Operations




Three Months Ended June 30, 2009 and June 30, 2008




The following table sets forth the key components of our results of operations for the three months ended June 30, 2009 and 2008, in dollars and as a percentage of sales (dollars in thousands):




Three Months Ended June 30,2009


2008% of





% ofDollars


Sales


Dollars


SalesSales

$
21,776






22,169Cost of Sales


19,564



89.84
%


19,648



88.63
%Gross Profit


2,212



10.16
%


2,521



11.37
%Operating ExpensesSelling Expenses


664



3.05
%


306



1.38
%General & Administrative Expenses


373



1.71
%


645



2.91
%Operating Income


1,175



5.40
%


1,570



7.08
%Interest Expenses


-



-



(17
)


(0.08
% )Change in derivative liability


64



0.22
%


(263
)


(1.19
% )Other (loss), net


262



1.20
%


(0
)


(0.00
% )Income Before Income Taxes


1,501



6.89
%


1,289



5.82
%Net income


1,501



6.89
%


1,289



5.82
%Foreign Currency translation gain (loss)


(140
)


(0.64
% )


91



0.41
%Comprehensive income


1,361



6.25
%


1,380



6.23
%




Sales. Sales decreased approximately $0.39 million, or 1.77%, to approximately $21.78 million in the three months ended June 30, 2009 from approximately $22.17 million in the same period last year. During the second quarter of 2008, we sold products that had been stored during the prior quarter due to heavy snow storms. As a result, sales were slightly higher in the second quarter of 2008 than 2009.




Cost of Sales. Our cost of goods sold is comprised of the costs of our raw materials, labor, overhead and sales tax. Our cost of goods sold decreased slightly to approximately $19.6 million in the three months ended June 30, 2009 from approximately $19.6 million in the three months ended June 30, 2008. This decrease was mainly due to decreased revenue in the three months ended June 30, 2009.




Gross Profit and Gross Margin.Our gross profit decreased approximately $0.3 million to approximately $2.2 million in the three months ended June 30, 2009 from approximately $2.5 million in the same period last year. Gross margin was 10.16% and 11.37% for the three months ended June 30, 2009 and 2008, respectively. Our gross margin was relatively stable since it is largely determined by the margin of the wholesale prices we buy from our suppliers and the reseller price we sell at distribution centers, both of which have remained relatively stable during the second quarters of 2008 and 2009.




Selling Expenses. Our selling expenses, which are comprised of transportation costs, salesmen salaries and rent expenses, increased approximately $0.2 million, or 117%, to approximately $0.7 million in the three months ended June 30, 2009 from approximately $0.3 million in the same period last year because bonuses payable to salesmen were drawn in advance to motivate salesmen during the three months ended June 30, 2009, which was not done in the same period last year.




28




General and Administrative Expenses. Our administrative expenses, which are comprised of salaries, travel expenses, audit fees, attorney's fees, advisory fees and depreciation expense decreased approximately $0.27 million to approximately $0.37 million in the three months ended June 30, 2009 from approximately $0.64 million in the three months ended June 30, 2008. As a percentage of sales, administrative expenses decreased to 1.71% in the three months ended June 30, 2009, as compared to 2.91% in the same period last year. The reason for the decrease is that our advisory fees in connection with the bridge loan fundraising conducted prior to the reverse merger transaction were lower during the second quarter of 2009 than the second quarter of 2008.




Interest Expense.  The interest expense was $0 inthe three months ended June 30, 2009 compared to $17,027 in the three-month ended June 30, 2008.  The interest expense in 2008 reflected the $500,000 convertible debentures we issued in April 2008.





Change in derivative liability.  Change of derivative liability was an income of $64,271 in thethree months ended June 30, 2009compared to an expense of $263,320 in 2008, representing the change in fair value of warrants outstanding. The change in fair value, as computed using the Black-Scholes option pricing model, primarily reflected the fluctuations in our stock price.




Tax. Since our operating subsidiaries benefited from a tax exemption for agriculture products for 2008 and 2009, we did not incur any income tax liability in 2008or 2009.




Net Income. As a result of the factors described above, our net income increased approximately $0.21 million to approximately $1.50 million or $0.02 per share (basic and diluted) in the three months ended June 30, 2009, from approximately $1.29 or $0.02 per share (basic and diluted) in the same period last year.




Six Months Ended June 30, 2009 and June 30, 2008




The following table sets forth the key components of our results of operations for the three months ended June 30, 2010 and 2009, in dollars and as a percentage of sales (dollars in thousands):




Six Months Ended June 30,2009


2008% of





% ofDollars


Sales


Dollars


SalesSales

$
40,306





$
30,012Cost of Sales


36,146



89.68
%


26,442



88.11
%Gross Profit


4,160



10.32
%


3,570



11.89
%Operating ExpensesSelling Expenses


888



2.20
%


526



1.75
%General & Administrative Expenses


1,309



3.25
%


735



2.45
%Operating Income


1,962



4.87
%


2,308



7.69
%Interest Expenses


(23
)


(0.06
% )


(17
)


(0.06
% )Change in derivative liability


25



0.06
%


(263
)


(0.88
% )Others, net


0



0.00
%


(0
)


(0.00
% )Total Other Income


3



0.01
%


(281
)


(0.93
% )Income Before Income Taxes


1,965



4.88
%


2,028



6.76
%Net income


1,965



4.88
%


2,028



6.76
%Foreign Currency translation gain (loss)


(167
)


(0.41
% )


123



0.41
%Comprehensive income

$
1,798



4.46
%


2,150



7.17
%




29




Sales. Sales increased approximately $10.30 million, or 34.32%, to approximately $40.31 million in the six months ended June 30, 2009 from approximately $30.01 million in the same period last year. Our production had declined during the first quarter of 2008 as a result of heavy snow in the regions where our products are grown. During the first quarter of 2009, more favorable weather conditions resulted in increased production and increased sales. Our production capacity also increased in the first quarter of 2009, as compared to the same period in 2008 because we cultivated an additional 28,000 mu (1 acre=6 mu) of land. This additional production contributed an additional $5.9 million in sales.




Cost of Sales. Our cost of goods sold increased approximately $9.7 million to approximately $36.1 million in the six months ended June 30, 2009 from approximately $26.4 million in the six months ended June 30, 2008. This increase was mainly due to increased revenue during the six months ended June 30, 2009.




Gross Profit and Gross Margin. Our gross profit increased approximately $0.6 million to approximately $4.2 million in the six months ended June 30, 2010 from approximately $3.6 million in the same period last year. Gross margin was 10.32 % and 11.89% for the six months ended June 30, 2009 and 2008, respectively.Our gross margin was relatively stable since it is largely determinate by the margin of the wholesale prices we buy from our suppliers and the reseller price we sell at distribution centers, both of which have remained relatively stable during the six months ended June 30, 2009 and 2008.




Selling Expenses. Our selling expenses increased approximately $0.4 million, or 68.7%, to approximately $0.9 million in the six months ended June 30, 2009 from approximately $0.5 million in the same period last year. As a percentage of net sales, selling expenses increased to 2.2% in the six months ended June 30, 2009 from 1.8% in the same period of 2008. Selling expenses increased because of increased sales in the first quarter of 2009 and because of the advancement of bonuses in the second quarter of 2009.




General and Administrative expenses. Our administrative expenses increased approximately $0.6 million to approximately $1.3 million in the six months ended June 30, 2009 from approximately $0.7 million in the six months ended June 30, 2008. As a percentage of net sales, administrative expenses increased to 3.25% in the six months ended June 30, 2009, as compared to 2.45% in the same period last year. Administrative expenses increased as a result of increased fees and expenses related to the reverse merger transaction that was consummated on January 15, 2009.




Interest Expense.  The interest expense was $22,500 inthe six months ended June 30, 2009 compared to $17,027 in the same period of 2008.  The interest expense in both periods reflected the $500,000 convertible debentures we issued in April 2008.





Change in derivative liability.  Change of derivative liability resulted in income of $25,471 in thesix months ended June 30, 2009compared to an expense of $263,320 in the same period of 2008, representing the change in fair value of warrants outstanding. The change in fair value, as computed using the Black-Scholes option pricing model, primarily reflected the fluctuation in our stock price.




Net Income. As a result of the factors described above, our net income was $1.97 million, or $0.02 per share (basic and diluted) for the six months ended June 30, 2009, as compared with $2.03 million, or $0.02 per share (basic and diluted) for the same period of 2008.




30




Liquidity and Capital Resources




General




Historically, our primary capital needs have been to fund our working capital requirements and leases of farmland, and our primary sources of funds have been cash generated from operations. We expect that anticipated cash flows from operations and loans from related parties will be sufficient to fund our current operations through at least the next twelve months, provided that:




·
We generate sufficient business so that we are able to generate substantial profits, which cannot be assured; and




·
We are able to generate savings by improving the efficiency of our operations.




As of June 30, 2009, cash and cash equivalents were $0.6 million, as compared to $0.5 million at December 31, 2008.




Cash Flow for six months ended June 30, 2009 as compared to the six months ended June 30, 2008.




The following table provides detailed information about our net cash flow for all financial statements periods presented in this report.




Cash Flow




(All amounts in thousands of U.S. dollars)




Six Months Ended June30,2009


2008Net cash provided by (used in) operating activities
$
(385
)
$
(337
)Net cash (used in) investing activities

(2
)

(4
)Net cash provided by (used in) financing activities

471


713




Operating Activities




Net cash used in operating activities was approximately $0.4 million in the six months ended June 30, 2009, an increase of approximately $0.1 million, from approximately $0.3 million in net cash provided by operating activities in the same period last year.




Investing Activities




Net cash used for investing activities in the six months ended June 30, 2009 and 2008 was $2,336 and $3,771 , respectively.




Financing Activities




Net cash generated by financing activities in the six months ended June 30, 2009 totaled approximately $0.47 million, compared to approximately $0.71 million in net cash generated by financing activities in the same period last year. There were loans from related parties on January 15, 2009, which was used for cash consideration and the payment of administrative expenses in connection with the reverse acquisition transaction. The company borrowed a short-term loan in 2008 in addition to the issuance of a convertible debenture on April 23, 2008.




31




On April 23, 2008, Organic Region issued convertible notes and warrants to four investors, pursuant to a securities purchase agreement. We have assumed all obligations under the purchase agreement, notes and warrants. The notes have an aggregate principal amount of $500,000 and have been paid in full pursuant to a partial payment agreement entered into on June 30, 2009, to repay the notes in two installments, one in July 2009 and one in August 2009.




Critical Accounting Policies and Estimates




The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments.




We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements.




Accounts Receivable– Our policy is to maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves.




Inventories– Inventories are valued at the lower of cost (determined on a weighted average basis) or market value. Management compares the cost of inventories with market value and an allowance is provided to reduce the value of inventories to their net market value.




Impairment– We apply the provisions of ASC 360-10 (Originally issued as FAS No. 144).. ASC 360-10 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. We test long-lived assets, including property, plant and equipment and intangible assets subject to periodic amortization, for recoverability at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater than its fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. We consider historical performance and future estimated results in our evaluation of potential impairment, and then we compare the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, we measure the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows as the rate we utilize to evaluate potential investments. We estimate fair value based on the information available in making whatever estimates, judgments and projections are considered necessary.




32




Revenue Recognition– Our revenue recognition policies are in compliance with ASC 605 (Originally issued as Staff Accounting Bulletin (SAB) 104). Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. Revenues from the sale of products are recognized at the point of sale of our products. Discounts provided to customers by us at the time of sale are recognized as a reduction in sales as the products are sold. Discounts provided by vendors are not recognized as a reduction in sales provided the coupons are redeemable at any retailer that accepts coupons. Sales taxes are not recorded as a component of sales. The “Cost of Goods Sold” line item of the Consolidated Statements of Income includes product costs, net of discounts and allowances. Discounts provided to us by vendors at the time of purchase are recognized as a reduction in inventory cost as the products are delivered. All other costs, including warehousing costs, transportation costs; salaries, rent expense and depreciation expense, are shown separately in selling expenses or general and administrative expense in our consolidated statements of income.




Fair Value Measurements And Financial Instruments




We determine the fair value of financial instruments in accordance with standards pertaining to fair value measurements. Such standards define fair value and establish a framework for measuring fair value in GAAP. Fair value involves significant estimates impacts the financials in many areas such as derivatives, stock comp and deferred compensation. These estimates can have significant impact on our financial statements based on the assumptions we use. See Note 7 to the consolidated financial statements for further information regarding our derivative and stock option positions.




Foreign Currency Translation– We use United States dollars for financial reporting purposes, and it is our functional currency. Our subsidiaries maintain their books and records in their functional currency -RMB, which is currency of China, where all of our operations are conducted. Such financial statements were translated into United States dollars in accordance with ASC 830 (Originally issued as Statement of Financial Accounts Standards (“SFAS”) No. 52, “Foreign Currency Translation”). According to the Statement, all assets and liabilities are translated at the current exchange rate on the balance sheet date, shareholder’s equity are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC 220 (Originally issued as SFAS No. 130, “Reporting Comprehensive Income”) as a component of shareholders’ equity.




Recent Accounting Pronouncements




In June 2009, the FASB issued ASC 105 (previously SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles ("GAAP") - a replacement of FASB Statement No. 162), which has become the source of authoritative accounting principles generally accepted in the United States recognized by the FASB to be applied to nongovernmental entities.




In June 2009, the FASB issued ASC 860 (previously SFAS No. 166, “Accounting for Transfers of Financial Assets”) , which requires additional information regarding transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. SFAS 166 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures. SFAS 166 is effective for fiscal years beginning after November 15, 2009. The Company does not believe this pronouncement will impact its financial statements.




In June 2009, the FASB issued ASC 810 (previously SFAS No. 167) for determining whether to consolidate a variable interest entity. These amended standards eliminate a mandatory quantitative approach to determine whether a variable interest gives the entity a controlling financial interest in a variable interest entity in favor of a qualitatively focused analysis, and require an ongoing reassessment of whether an entity is the primary beneficiary. These amended standards were effective for us beginning in the first quarter of fiscal year 2010, and have had no impact on our consolidated financial statements.




33




Off Balance Sheet Arrangements




We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to an investor in our securities.




ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.




Not Applicable.




ITEM 4.
CONTROLS AND PROCEDURES.




Evaluation of Disclosure Controls and Procedures.




The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.




As required by Rule 13a-15 and Rule 15d-15 under the Exchange Act, our management, including Mr. Xiong Luo , our chief executive officer and Ms. Huasong Sheena Shen , our chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2009. For the reasons set forth in the following paragraphs, our management, under the direction of Mr. Luo and Ms. Shen concluded that as of June 30, 2009, our disclosure controls and procedures were not effective.




At December 31, 2008, we were a privately-owned company, and, accordingly, we did not make a determination as to the effectiveness of our internal controls over financial reporting.  For the reasons set forth below, our internal controls over financial reporting were not effective at December 31, 2008 or June 30, 2009.




On August 23, 2010, we concluded, after a review of the pertinent facts, that the previously issued financial statements contained in the Company's Annual Report on Form 10-K for the years ended December 31, 2009, and Quarterly Reports for the quarters ended March 31, 2010, September 30, June 30 and March 31, 2009, respectively, should not be relied upon due to the following:




·
The Company improperly allocated, for financial statement purposes, the proceeds received in connection with the April 2008 debt financing transaction and the August and December 2009 and January 2010 preferred stock financing transactions (collectively, “the financings”). The restated financial statements include the effects of properly allocating the financing proceeds between (1) the debt or preferred stock, as applicable, (2) any derivative liabilities associated with warrants for the purchase of common stock, and (3) any beneficial conversion features (“BCF”), as a component of additional paid-in capital, which allow the debt and preferred shareholders to convert their investment into the Company’s common stock on favorable terms.




·
Due to the improper allocation of proceeds on the April 2008 debt financing which resulted in an incorrect basis for the debt, the Company improperly reported the loss on debt extinguishment upon its settlement in August 2009. The debt settlement will be reported in the in the 2009 income statement as described, beginning with the restated annual financial statements for 2009, and in the restated September 30, 2009 10-Q filing. The settlement occurred in August 2009, and therefore does not affect the income statements presented in 2010. However, the accompanying balance sheets appropriately reflect the impact of settlement.




34




·
Certain warrants containing variable exercise terms associated with the financings were reported as a component of paid-in capital instead of properly reflecting them as a derivative liability at fair value, with changes in fair value reported in the income statement each period. The restated financial statements include the effects of reporting the derivative liabilities and their associated changes in value correctly.




·
A BCF was inappropriately recorded as a debt discount on the April 2008 financing in addition to being amortized over the subsequent 12 months with a charge to expense. Furthermore, separate BCFs associated with the December 2009 and January 2010 preferred stock financings were erroneously omitted due to a misallocation of proceeds for financial statement purposes. The restated financial statements include the effects of allocating financing proceeds to the applicable BCFs by recording a preferred stock discount with a credit to additional paid-in capital. The discounts were then charged immediately to retained earnings as deemed preferred stock dividends pursuant to the terms of the agreement which provide immediate conversion rights.




·
Earnings per share has been restated to include the effects of the restated financial statements




We have restated our balance sheet at June 30, 2009 and our income statement for the three and six months quarter ended June 30, 2009 and our statements of cash flows for the three and six months quarter ended June 30, 2009 and 2008 in this Form 10-Q. Our balance sheet at December 31, 2008 is restated in our annual report on Form 10-K/A, amendment no. 2, and is included in this Form 10-Q. The Company will restate its financial statements for the years ended December 31, 2009 and 2008 and the quarters ended March 31, 2010, September 30, June 30 and March 31, 2009, respectively.




We intends to take such steps as are necessary, including the engagement of accounting personnel with experience in US GAAP, in order that our financial controls and disclosure controls are effective.




Changes in Internal Control Over Financial Reporting.




During the fiscal quarter ended June 30, 2009, other than as reflected in this Item 4 and our restated financial statements , there were no changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.




35




PART II






OTHER INFORMATION




ITEM 6.
EXHIBITS.




The following exhibits are filed as part of this report or incorporated by reference:




Exhibit No.
Description31.1
Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.31.2
Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
Certification of Principal Executive Officer and Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.





36




SIGNATURES




Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




SINO GREEN LAND CORPORATIONDate: October 27, 2010
By: /s/ Xiong LuoXiong Luo , Chief Executive Officer(Principal Executive Officer)Date: October 27, 2010
By: /s/ Huasong Sheena ShenHuasong Sheena Shen , Chief Financial Officer(Principal Financial Officer and Principal Accounting Officer)